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Innovation and Foreign OwnershipMaria GuadalupeINSEAD - Economics and Political Sciences; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA) Olga KuzminaNew Economic School (NES); Columbia University - Columbia Business School Catherine ThomasColumbia Business School - Finance and Economics November 22, 2010 CEPR Discussion Paper No. 8141 Abstract: This paper uses a rich panel dataset of Spanish manufacturing firms (1990-2006) and a propensity score reweighting estimator to show that multinational firms acquire the most productive domestic firms, which, on acquisition, conduct more product and process innovation (simultaneously adopting new machines and organizational practices) and adopt foreign technologies, leading to higher productivity. We propose a model of endogenous selection and innovation in heterogeneous firms that jointly explains the observed selection process and the innovation decisions. Further, we show in the data that innovation on acquisition is associated with the increased market scale provided by the parent firm.
Number of Pages in PDF File: 43 Keywords: Foreign Ownership, Productivity, Multinational Production, Innovation JEL Classification: D22, F23, O31 working papers seriesDate posted: November 30, 2010Suggested CitationContact Information
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